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Microsoft, HP Accused of ''Skirting'' U.S. Taxes

By - Source: Reuters | B 88 comments

U.S. companies have at least $1.5 trillion in profits sitting offshore, says the Senate's Permanent Subcommittee on Investigations.

Reuters reports that both Hewlett-Packard and Microsoft are refuting claims that they use offshore units and loopholes to prevent Uncle Sam from yanking taxes from their billions of dollars in profits.

The claims were made by the Senate's Permanent Subcommittee on Investigations which claims that tax avoidance is running rampant in the technology sector. Tech companies like Microsoft and HP have reportedly stashed away their intellectual properties, royalties and licensing fees in "overseas tax havens" to skirt government taxes.

The report arrives after the panel subpoenaed internal documents from the two companies, and interviewed their top officials. "The tax practices and gimmicks range from egregious to dubious validity," said Democratic Senator Carl Levin, chairman of the panel during a news conference.

Senator Tom Coburn, the top Republican on the panel, admitted that tax avoidance is not illegal. But he also blamed Congress for creating the situation, referring to complex tax code and a hefty 35-percent corporate tax rate. Very few companies pay that rate, he said.

Now here's the shocker. Microsoft reportedly shifted $21 billion to offshore accounts from 2009 to 2011, almost half of its U.S.-based retail sales revenue. Thus, the Redmond company saved up to $4.5 billion USD in taxes on goods that were sold here in the States. The company has even moved royalty revenue of units to low-tax nations to avoid paying billions to the U.S.

It gets even better. Levin told Reuters that the Redmond company legally established one Microsoft Singapore unit in Bermuda unmanned. Wanting to know why, Levin asked Microsoft's tax vice president, William Sample, if this office was established merely to cut its tax bill. Sample confirmed with a "yes, that is correct."

The report goes on to reveal that HP avoided paying millions of dollars in taxes by using an exception in the law for short-term loans. The company reportedly funded its U.S.-based operation through intra-company loans. Now more than 90-percent of HP's cash is sitting offshore, and one document even suggests that HP has slipped cash into the States without paying the appropriate taxes.

"We are disappointed to see what appears to be a politically motivated attack on one of America's largest employers," HP spokesman Michael Thacker said before the hearing.

To read the full report, head here.

 

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Top Comments
  • 28 Hide
    cmichael138 , September 22, 2012 2:03 PM
    Who is dumb enough to think that these companies wouldn't use the same tactics if the tax rates were lowered to 15%.
  • 25 Hide
    Anonymous , September 22, 2012 2:03 PM
    Dear god. Stop raising the taxes of the lower/middle classes! Fix loopholes and penalize companies for this kind of tax evasion, christ!
  • 25 Hide
    Pennanen , September 22, 2012 1:39 PM
    aicomMaybe if the taxes on profits weren't so high, companies wouldn't try to evade them.

    Maybe if people actually paid the taxes instead of avoiding them, the taxes wouldnt be that high.
Other Comments
  • 5 Hide
    aicom , September 22, 2012 1:09 PM
    Maybe if the taxes on profits weren't so high, companies wouldn't try to evade them.
  • -5 Hide
    nieur , September 22, 2012 1:10 PM
    Those are international companies and there is nothing wrong if they are LEGALLY trying to increase net profit
  • -6 Hide
    alikum , September 22, 2012 1:15 PM
    Politicians will always be politicians. You keep demanding more taxes while doing close to nothing.
  • 25 Hide
    Pennanen , September 22, 2012 1:39 PM
    aicomMaybe if the taxes on profits weren't so high, companies wouldn't try to evade them.

    Maybe if people actually paid the taxes instead of avoiding them, the taxes wouldnt be that high.
  • 15 Hide
    zoemayne , September 22, 2012 2:01 PM
    so i looked at the main article and there is also no mention of apple which has to be the biggest offender here or at least they have the highest current growth rate of overseas $. but it's not illegal.. they should let the money in @ ~10% etc only if it directly increases employment...
  • 28 Hide
    cmichael138 , September 22, 2012 2:03 PM
    Who is dumb enough to think that these companies wouldn't use the same tactics if the tax rates were lowered to 15%.
  • 25 Hide
    Anonymous , September 22, 2012 2:03 PM
    Dear god. Stop raising the taxes of the lower/middle classes! Fix loopholes and penalize companies for this kind of tax evasion, christ!
  • 3 Hide
    Anonymous , September 22, 2012 2:17 PM
    Microsoft and HP have profited handsomely from suckeling at uncle Sams tits, high tech tax breaks and H-1B visas to name a few! Microsoft for one, if found guilty, should be forced to rewrite the Visual Studio 2012 GUI to look more like the Visual Studio 2010 and previous editions of the IDE! Humans and their ancestors developed color perception over the eons to better differentiate the lush green forest from the tiger that is about to pounce and devour, should the ability to make out color be diminished in any way! Now Microsoft wants to make everyone color blind! Microsoft what do you and your “style mavens” know that evolution and the rest of us do not!
  • -1 Hide
    nebun , September 22, 2012 2:28 PM
    cmichael138Who is dumb enough to think that these companies wouldn't use the same tactics if the tax rates were lowered to 15%.

    cmichael138Who is dumb enough to think that these companies wouldn't use the same tactics if the tax rates were lowered to 15%.

    very true....i don't blame companies that are building offshore...good for them
  • 5 Hide
    mcd023 , September 22, 2012 2:35 PM
    well, they were paying taxes at the lower rate before 2009, it seems. Now, the gov't isn't getting as much as it would have with a lower rate. But at 35% (Are you freaking serious!?!?), I'd be finding ways to keep my money, too. that's
  • 6 Hide
    Shin-san , September 22, 2012 2:53 PM
    It's scummy, a lot of companies are doing it, and it is wrong. I know lots of people that would do the same if they can recover a lot of money on their taxes. However, even they would acknowledged that they are being scumbags in the situation. I don't blame them though
    articleWilliam Sample, if this office was established merely to cut its tax bill. Sample confirmed with a "yes, that is correct."
    I'm quite impressed by the straightforward honesty answering that question
  • 13 Hide
    victorious 3930k , September 22, 2012 3:37 PM
    And nothing happened to the worst offender, Apple... *rolleyes*
  • 2 Hide
    bak0n , September 22, 2012 3:44 PM
    PennanenMaybe if people actually paid the taxes instead of avoiding them, the taxes wouldnt be that high.


    Do you seriously think the government would lower taxes because they are getting to much from one source?
  • 10 Hide
    kcorp2003 , September 22, 2012 3:51 PM
    i see some single family survive on net income of less than 22,000 a year (and support at least 1 kid). and they pay their taxes.
  • -1 Hide
    enewmen , September 22, 2012 4:04 PM
    nieurThose are international companies and there is nothing wrong if they are LEGALLY trying to increase net profit

    I agree completely. You will be happy being raped every day if international companies can do it LEGALLY.
  • 13 Hide
    Kami3k , September 22, 2012 4:18 PM
    TeholTheTaxedDear god. Stop raising the taxes of the lower/middle classes! Fix loopholes and penalize companies for this kind of tax evasion, christ!


    Funny how if a average joe were to do this they would be arrested for tax evasion, but if the big corporations do it? It's business as usual.
  • 6 Hide
    cookoy , September 22, 2012 4:28 PM
    Tax avoidance is not illegal. Many financial and tax consultants make their living offering advice on how to legally minimize tax payments. If there are loopholes, they will find them and use them. Anything for that additional quick buck.
  • 6 Hide
    kinggraves , September 22, 2012 4:36 PM
    Big corp avoids paying taxes?

    you-don't-say.jpg

  • 0 Hide
    jaquith , September 22, 2012 4:40 PM
    Hey as long as our laws permit it companies and folks like Mitt Romney will go offshore to shelter themselves from taxes, or hell Eduardo Saverin renounced his US Citizenship before Facebook went public to avoid windfall taxes. Ever look at where your US based CPU (Intel or AMD) is manufactured??

    Wealthy companies and individuals control these laws and seem to be fine and dandy raping the rest of the folks. You're the dumb-asses who put these folks in office! The only folks that are legitimately Republican are those who earn over $1M, otherwise you're kidding yourself.

    China pays its' way into the WTO and while they're allowed by the few to screw you for profits.

    The problem is we're all (remainder of the modern world; those folks = you) about tapped-out and broke.

    So what do we do, we ague & fight over nothing while 'these' folks LOL at you and level-shift the arguments over further exploitation and pit the '99%' against each other. The system is broke: morally, financially, corruption -- you name it.
  • 0 Hide
    A Bad Day , September 22, 2012 4:58 PM
    There's always free riders on the system. The sometimes fun part is kicking them off.

    The often times tough part is fighting off their army of lawyers and lobbyists.
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